M/S G.L.CONSTRUCTION PVT LTD,MUMBAI vs. ACIT/NATIONAL FACE LESS APPEAL CENTRE, MUMBAI

PER OM PRAKASH KANT, AM

This appeal has been preferred by the assessee against order dated 26.07.2021 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2019-20, raising sole ground as under:

The Ld. CIT(A) erred in confirming the addition of Rs.12,71,218/- u/s 36(1)(va) for delay in deposit of Employees

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Contribution Rs.9,47,090/ Contribution Rs.9,47,090/- & Rs.324125/- being professional being professional tax deducted salary. tax deducted salary. 2. During the course of the hearing, the assessee filed an During the course of the hearing, the assessee filed an During the course of the hearing, the assessee filed an additional ground and submitted additional ground and submitted that same might be admitted in same might be admitted in view of the decision of the Hon’ble Supreme Court in the case of view of the decision of the Hon’ble Supreme Court in the case of view of the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. v. CIT 229 ITR 389 (SC). The National Thermal Power Company Ltd. v. CIT 229 ITR 389 (SC). The National Thermal Power Company Ltd. v. CIT 229 ITR 389 (SC). The said additional ground is reproduced as under: ditional ground is reproduced as under:

The Ld. AO/CPC erred in making addition of Rs.12,71,218/ The Ld. AO/CPC erred in making addition of Rs.12,71,218/ The Ld. AO/CPC erred in making addition of Rs.12,71,218/- u/s 36(1)(va) of the Act while passing order u/s 143(1) when u/s 36(1)(va) of the Act while passing order u/s 143(1) when u/s 36(1)(va) of the Act while passing order u/s 143(1) when there was no specific power given to CPC to make adjustment there was no specific power given to CPC to make adjustment there was no specific power given to CPC to make adjustment in return filed by assessee. in return filed by assessee. By mistake & oversight, this ground of appeal was not taken ake & oversight, this ground of appeal was not taken ake & oversight, this ground of appeal was not taken while filling appeal. while filling appeal. While passing the order u/s 250, CIT(A) wrongly relied on While passing the order u/s 250, CIT(A) wrongly relied on While passing the order u/s 250, CIT(A) wrongly relied on section 143(1)(a)(iv) (para no. 3.3., page No. 11 of the CIT(A) section 143(1)(a)(iv) (para no. 3.3., page No. 11 of the CIT(A) section 143(1)(a)(iv) (para no. 3.3., page No. 11 of the CIT(A) order). 3. We have heard rival submission of the parties We have heard rival submission of the parties We have heard rival submission of the parties on the issue of the admission of the additional ground. The Additional ground the admission of the additional ground. The Additional ground the admission of the additional ground. The Additional ground being purely legal in nature and not requiring investigation of the being purely legal in nature and not requiring investigation of the being purely legal in nature and not requiring investigation of the fresh facts, therefore therefore, same is admitted for adjudication for adjudication in view of decision of the Hon’ble Supreme Court in decision of the Hon’ble Supreme Court in the case of NTPC Ltd. the case of NTPC Ltd. (supra).

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the relevant laws. While While processing of the return of income by the processing of the return of income by the Centralized Processing Centre (CPC), Processing Centre (CPC), the said amount of ESI/PF he said amount of ESI/PF paid after due date of relevant laws paid after due date of relevant laws, was disallowed was disallowed, in view of provisions of section 36(1 provisions of section 36(1)(va) of the Act. This processing was done processing was done by the CPC and terms of section 143(1)(a) of the Act and said by the CPC and terms of section 143(1)(a) of the by the CPC and terms of section 143(1)(a) of the disallowance was made invoking the provisions of section disallowance was made invoking the provisions of s disallowance was made invoking the provisions of s 143(1)(a)(iv) of the Act, 143(1)(a)(iv) of the Act, on the basis of the facts furnished by the n the basis of the facts furnished by the assessee, in the return o , in the return of income.

“3. The only ground of appeal of the present appeal is against 3. The only ground of appeal of the present appeal is against 3. The only ground of appeal of the present appeal is against the order uls. 143(1) dated 07.07.2020 for A.Y. 2019 the order uls. 143(1) dated 07.07.2020 for A.Y. 2019 the order uls. 143(1) dated 07.07.2020 for A.Y. 2019-20 whereby a disallowance of Rs 12,71,250/ whereby a disallowance of Rs 12,71,250/- - was made us.36(1)(va) for failure of the appellant to pay the employees' us.36(1)(va) for failure of the appellant to pay the employees' us.36(1)(va) for failure of the appellant to pay the employees' contribution to contribution to PF/ESI before the prescribed due dates under PF/ESI before the prescribed due dates under the relevant Acts by the AO CPC ITR. the relevant Acts by the AO CPC ITR. 3.1 However, it is the contention of the ap However, it is the contention of the appellant that since the pellant that since the amount has been paid before the due date for filing of return of amount has been paid before the due date for filing of return of amount has been paid before the due date for filing of return of income us. 139(1), the same ought to be allowed as a deduction income us. 139(1), the same ought to be allowed as a deduction income us. 139(1), the same ought to be allowed as a deduction as per the case laws cited. as per the case laws cited. 3.2 From the facts on record, it is evident that the disallowance From the facts on record, it is evident that the disallowance From the facts on record, it is evident that the disallowance of Rs. 12,71,250/ 1,250/-has been made us 36(1)(va) of the Act on the has been made us 36(1)(va) of the Act on the basis of details reported in Tax Audit Report for the relevant basis of details reported in Tax Audit Report for the relevant basis of details reported in Tax Audit Report for the relevant period.

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3.3. Since these amounts were not disallowed in the Return of 3.3. Since these amounts were not disallowed in the Return of 3.3. Since these amounts were not disallowed in the Return of income filed by the appellant in IT , the variance between Tax income filed by the appellant in IT , the variance between Tax income filed by the appellant in IT , the variance between Tax Audit Report and ITR has been duly flagged by the CPC in the port and ITR has been duly flagged by the CPC in the port and ITR has been duly flagged by the CPC in the computerized processing and disallowed u/s. 143(1)(a)(iv) of computerized processing and disallowed u/s. 143(1)(a)(iv) of computerized processing and disallowed u/s. 143(1)(a)(iv) of the Act on the basis of facts furnished by the appellant for the Act on the basis of facts furnished by the appellant for the Act on the basis of facts furnished by the appellant for audit. Therefore, the adjustments carried out were well within audit. Therefore, the adjustments carried out were well within audit. Therefore, the adjustments carried out were well within the ambit of the p the ambit of the provisions of section 143(1)(a)(iv) which reads rovisions of section 143(1)(a)(iv) which reads as follows "Assessment. "Assessment. 143. (1) Where a return has been made under section 139, or in 143. (1) Where a return has been made under section 139, or in 143. (1) Where a return has been made under section 139, or in response to a notice response to a notice under sub-section (1) of section 142, such section (1) of section 142, such return shall be processed in the following return shall be processed in the following manner, namely manner, namely: (a) the total income or loss shall be computed after making the (a) the total income or loss shall be computed after making the (a) the total income or loss shall be computed after making the following adjustments, following adjustments, namely; (i) any arithmetical error in the retum: /*) (i) any arithmetical error in the retum: /*) (i) an incorrect claim, if such incorrect claim is apparent from (i) an incorrect claim, if such incorrect claim is apparent from (i) an incorrect claim, if such incorrect claim is apparent from any information in the (ii) disallowance of loss any information in the (ii) disallowance of loss claimed, if retum claimed, if retum of the previous year for which set off of loss is claimed was of the previous year for which set off of loss is claimed was of the previous year for which set off of loss is claimed was furnished beyond the due date specified under subsection 44) furnished beyond the due date specified under subsection 44) furnished beyond the due date specified under subsection 44) of section 139; of section 139; (iv) disallowance of expenditure indicated in the audit report (iv) disallowance of expenditure indicated in the audit report (iv) disallowance of expenditure indicated in the audit report but not taken into account in comput but not taken into account in computing the total income in the ing the total income in the return:" 3.4. The indication of disallowance u/s 36(1)(va) is thus 3.4. The indication of disallowance u/s 36(1)(va) is thus 3.4. The indication of disallowance u/s 36(1)(va) is thus embedded in the details given in Tax Audit Report in clause embedded in the details given in Tax Audit Report in clause embedded in the details given in Tax Audit Report in clause 20(b) of Form No.3CD, i.e., due dates as prescribed 20(b) of Form No.3CD, i.e., due dates as prescribed 20(b) of Form No.3CD, i.e., due dates as prescribed u/s.36(1)(va) and the actual dates of payment rep u/s.36(1)(va) and the actual dates of payment rep u/s.36(1)(va) and the actual dates of payment reported, thus clearly indicating the deviations if any which attract such clearly indicating the deviations if any which attract such clearly indicating the deviations if any which attract such disallowance, on the books of accounts and other evidences disallowance, on the books of accounts and other evidences disallowance, on the books of accounts and other evidences furnished by the appellant before the Audit. furnished by the appellant before the Audit. 3.5 Since the delay in such payment of employees contribution Since the delay in such payment of employees contribution Since the delay in such payment of employees contribution to PF/ESI beyond t to PF/ESI beyond the due dates as prescribed us.36(1)(va) he due dates as prescribed us.36(1)(va) clearly falls within the ambit of prima facie adjustments to be clearly falls within the ambit of prima facie adjustments to be clearly falls within the ambit of prima facie adjustments to be carried out us. 143(1)(a)(iv), the disallowance made by CPC us. carried out us. 143(1)(a)(iv), the disallowance made by CPC us. carried out us. 143(1)(a)(iv), the disallowance made by CPC us. 143(1) on this issue is found to be in order. 143(1) on this issue is found to be in order.

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4.4. Under the 4.4. Under the Income Tax Act, 1961, any sum received by the Income Tax Act, 1961, any sum received by the assessee from his employees as contribution to any provident assessee from his employees as contribution to any provident assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the fund or superannuation fund or any fund set up under the fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such provisions of ESI Act or any other fund for the welfare of such provisions of ESI Act or any other fund for the welfare of such employees is first treated a employees is first treated as "Income" in the hands of the s "Income" in the hands of the assessee-employer as per sub employer as per sub-clause (x) of Clause (24) of clause (x) of Clause (24) of section 2, which reads as under section 2, which reads as under “Definition 2. In this Act, unless the context otherwise requires In this Act, unless the context otherwise requires In this Act, unless the context otherwise requires (24) “income” includes (24) “income” includes - (x) any sum received by the assessee from (x) any sum received by the assessee from his employees as his employees as contributions to any provident fund or superannuation fund or contributions to any provident fund or superannuation fund or contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State any fund set up under the provisions of the Employees' State any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the Insurance Act, 1948 (34 of 1948), or any other fund for the Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees;" welfare of such employees;" 4.5. The employees' contrib 4.5. The employees' contribution which is so treated as ution which is so treated as "income" of the Employer u/s.2(24)(x), is allowed as a "income" of the Employer u/s.2(24)(x), is allowed as a "income" of the Employer u/s.2(24)(x), is allowed as a "Deduction" under section 36 of the Income Tax Act, 1961 while "Deduction" under section 36 of the Income Tax Act, 1961 while "Deduction" under section 36 of the Income Tax Act, 1961 while computing the income under the head 'Profits and gains of computing the income under the head 'Profits and gains of computing the income under the head 'Profits and gains of business or profession' only if it has been deposit business or profession' only if it has been deposit business or profession' only if it has been deposited by the Employer within the due dates prescribed under the relevant Employer within the due dates prescribed under the relevant Employer within the due dates prescribed under the relevant Acts or Funds. Clause (va) of Sub Acts or Funds. Clause (va) of Sub-section 1 of Section 36 which section 1 of Section 36 which provides for such deduction reads as under: provides for such deduction reads as under: "Other deductions. "Other deductions. 36. (1) The deductions provided for in the following clause 36. (1) The deductions provided for in the following clause 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in shall be allowed in respect of the matters dealt with therein, in shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 computing the income referred to in section 28 (va) any sum received by the assessee from any of his employees to which received by the assessee from any of his employees to which received by the assessee from any of his employees to which the provisions of sub the provisions of sub-clause (x) of clause (24) of section 2 apply, clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's if such sum is credited by the assessee to the employee's if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. account in the relevant fund or funds on or before the due date. account in the relevant fund or funds on or before the due date. Explanation. Explanation. - For the purposes of this clause, "due date" For the purposes of this clause, "due date" means the date by which the assessee is required as an means the date by which the assessee is required as an means the date by which the assessee is required as an employer to credit employer to credit an employee's contribution to the employee's an employee's contribution to the employee's account in the relevant fund under any Act, rule. order or account in the relevant fund under any Act, rule. order or account in the relevant fund under any Act, rule. order or

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notification issued there notification issued there-under or under any standing order, under or under any standing order, award, contract of service or otherwise;" award, contract of service or otherwise;" 4.6. Thus, the provisions regarding the deduction 4.6. Thus, the provisions regarding the deduction 4.6. Thus, the provisions regarding the deduction towards employees' contribution of PF/ESI in the hands of the employer employees' contribution of PF/ESI in the hands of the employer employees' contribution of PF/ESI in the hands of the employer us.36 are very clear. When it is specifically covered under us.36 are very clear. When it is specifically covered under us.36 are very clear. When it is specifically covered under section 36(1)(va), it cannot be considered under any other section 36(1)(va), it cannot be considered under any other section 36(1)(va), it cannot be considered under any other provisions of the Act including section 37 or section 43B, as provisions of the Act including section 37 or section 43B, as provisions of the Act including section 37 or section 43B, as evident from the following dent from the following 4.7. As far as the Employer's own contribution is concerned, 4.7. As far as the Employer's own contribution is concerned, 4.7. As far as the Employer's own contribution is concerned, though it is abusiness expenditure, its allowability for the though it is abusiness expenditure, its allowability for the though it is abusiness expenditure, its allowability for the purposes of computing taxable income is subject to certain purposes of computing taxable income is subject to certain purposes of computing taxable income is subject to certain rigours of actual payment. Since the purpose of th rigours of actual payment. Since the purpose of th rigours of actual payment. Since the purpose of this statutory obligation cast on the employer is to provide for a corpus fund obligation cast on the employer is to provide for a corpus fund obligation cast on the employer is to provide for a corpus fund on retirement of the employees, mere creation of that liability on retirement of the employees, mere creation of that liability on retirement of the employees, mere creation of that liability and providing for it by way of book entries is not enough and and providing for it by way of book entries is not enough and and providing for it by way of book entries is not enough and its actual payment is essential. It is towards this o its actual payment is essential. It is towards this o its actual payment is essential. It is towards this objective that the employer's contribution is brought under the ambit of the employer's contribution is brought under the ambit of the employer's contribution is brought under the ambit of section 43B which allows certain deductions only on actual section 43B which allows certain deductions only on actual section 43B which allows certain deductions only on actual payment basis only. payment basis only. 4.8. Section 43B specifies the list of deductions that are 4.8. Section 43B specifies the list of deductions that are 4.8. Section 43B specifies the list of deductions that are admissible under the Income Tax Act, 1961 only admissible under the Income Tax Act, 1961 only admissible under the Income Tax Act, 1961 only upon their actual payment. Employer's contribution to PF/ESI is covered in actual payment. Employer's contribution to PF/ESI is covered in actual payment. Employer's contribution to PF/ESI is covered in clause (b) of section 43B. According to it, if any sum towards clause (b) of section 43B. According to it, if any sum towards clause (b) of section 43B. According to it, if any sum towards employer's employer's employer's contribution contribution contribution to to to any any any provident provident provident fund fund fund or or or superannuation fund or gratuity fund or any other fund for the superannuation fund or gratuity fund or any other fund for the superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or re of the employees is actually paid by the assessee on or re of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income before the due date for furnishing the return of the income before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled section (1) of section 139, assessee would be entitled section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be to deduction under section 43B and such deduction would be to deduction under section 43B and such deduction would be admissible fo admissible for the accounting year. Thus, even if the payment r the accounting year. Thus, even if the payment is deferred to the next accounting year, the employer can still is deferred to the next accounting year, the employer can still is deferred to the next accounting year, the employer can still claim the same as an eligible business deduction of the year if claim the same as an eligible business deduction of the year if claim the same as an eligible business deduction of the year if it was paid on or before the due date for filing of income us. it was paid on or before the due date for filing of income us. it was paid on or before the due date for filing of income us. 139(1). 4.9. This provision us.43B does not cover employees' s provision us.43B does not cover employees' s provision us.43B does not cover employees' contribution referred to in clause (va) of sub contribution referred to in clause (va) of sub-section (1) of -section (1) of section 36 of the Act, as evident from a bare reading of the section 36 of the Act, as evident from a bare reading of the section 36 of the Act, as evident from a bare reading of the sections.

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"Certain deductions to be only on actual payment. "Certain deductions to be only on actual payment. "Certain deductions to be only on actual payment. 43B. Notwithstanding anythin 43B. Notwithstanding anything contained in any other g contained in any other provision of this Act, a deduction otherwise allowable under provision of this Act, a deduction otherwise allowable under provision of this Act, a deduction otherwise allowable under this Act in respect of this Act in respect of 1. any sum payable by the assessee by way of tax, duty, cess 1. any sum payable by the assessee by way of tax, duty, cess 1. any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time or fee, by whatever name called, under any law for the time or fee, by whatever name called, under any law for the time being in force, or being in force, or (b) any sum payable by the assessee as an emplover by way of sum payable by the assessee as an emplover by way of sum payable by the assessee as an emplover by way of contribution to any provident fund or superannuation fund or contribution to any provident fund or superannuation fund or contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or gratuity fund or any other fund for the welfare of employees, or gratuity fund or any other fund for the welfare of employees, or shall be allowed (irrespective of the previous year in which the shall be allowed (irrespective of the previous year in which the shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee o pay such sum was incurred by the assessee o pay such sum was incurred by the assessee according to the method of accounting regularly employed by according to the method of accounting regularly employed by according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of him) only in computing the income referred to in section 28 of him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: that previous year in which such sum is actually paid by him: that previous year in which such sum is actually paid by him: Provided that nothing conta Provided that nothing contained in this section shall apply in ined in this section shall apply in relation to any sum which is actually paid by the assessee on relation to any sum which is actually paid by the assessee on relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for fumishing the or before the due date applicable in his case for fumishing the or before the due date applicable in his case for fumishing the retum of income under sub retum of income under sub-section (1) of section 139 in respect section (1) of section 139 in respect of the previous year in which of the previous year in which the liability to pay such sum was the liability to pay such sum was incurred as aforesaid and the evidence of such payment is incurred as aforesaid and the evidence of such payment is incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. furnished by the assessee along with such return. furnished by the assessee along with such return. 4.10. The provisions of section 43B have undergone changes 4.10. The provisions of section 43B have undergone changes 4.10. The provisions of section 43B have undergone changes from time to time and were subject of judicial interpre from time to time and were subject of judicial interpre from time to time and were subject of judicial interpretations as well. Section 43B was inserted by Finance Act, 1983, with well. Section 43B was inserted by Finance Act, 1983, with well. Section 43B was inserted by Finance Act, 1983, with effect from 1 effect from 1-4-1984, whose sole object was to disallow 1984, whose sole object was to disallow deductions claimed merely by making a book entry based on deductions claimed merely by making a book entry based on deductions claimed merely by making a book entry based on mercantile system of accounting and allow deduction on mercantile system of accounting and allow deduction on mercantile system of accounting and allow deduction on payment under Cash payment under Cash Basis. This was in the form of a rigour on Basis. This was in the form of a rigour on the assessee as an employer and not as a concession or the assessee as an employer and not as a concession or the assessee as an employer and not as a concession or beneficial or benevolent provision. beneficial or benevolent provision. 4.11. Vide Finance Act 1987, first proviso to Section 43B was 4.11. Vide Finance Act 1987, first proviso to Section 43B was 4.11. Vide Finance Act 1987, first proviso to Section 43B was inserted, whereby the conditions for allowing payment of it inserted, whereby the conditions for allowing payment of it inserted, whereby the conditions for allowing payment of items referred to in clause (a), i.e., if tax, duty, cess or fee referred in referred to in clause (a), i.e., if tax, duty, cess or fee referred in referred to in clause (a), i.e., if tax, duty, cess or fee referred in clause were relaxed and these sums were allowed as clause were relaxed and these sums were allowed as clause were relaxed and these sums were allowed as

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deduction for the same accounting year if paid after the closing deduction for the same accounting year if paid after the closing deduction for the same accounting year if paid after the closing of accounting year but before due date of filling of Return of of accounting year but before due date of filling of Return of of accounting year but before due date of filling of Return of Income under the Income Tax Act, 1961. come under the Income Tax Act, 1961. However, the However, the relaxations of first proviso did not apply to employer's relaxations of first proviso did not apply to employer's relaxations of first proviso did not apply to employer's contribution to labour welfare funds such as PF/ESI etc contribution to labour welfare funds such as PF/ESI etc contribution to labour welfare funds such as PF/ESI etc referred to in clause (b) of 43B. The reason was that employer referred to in clause (b) of 43B. The reason was that employer referred to in clause (b) of 43B. The reason was that employer should not sit on collected co should not sit on collected contribution of employees and ntribution of employees and deprive the workmen of the rightful benefits under social deprive the workmen of the rightful benefits under social deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to welfare legislations by delaying payment of contributions to welfare legislations by delaying payment of contributions to welfare funds. Thus, though the emplover's contribution in welfare funds. Thus, though the emplover's contribution in welfare funds. Thus, though the emplover's contribution in clause (b) was included in section 43B alongside t clause (b) was included in section 43B alongside t clause (b) was included in section 43B alongside those items like tax, duty, cess or fee as referred to in clause (a) thereof, like tax, duty, cess or fee as referred to in clause (a) thereof, like tax, duty, cess or fee as referred to in clause (a) thereof, there there there were more stringent conditions for allowing the were more stringent conditions for allowing the were more stringent conditions for allowing the employer's contribution as compared to those items covered in employer's contribution as compared to those items covered in employer's contribution as compared to those items covered in clause 4.12. This differential treatment of employer's contrib 12. This differential treatment of employer's contribution vis a 12. This differential treatment of employer's contrib vis tax, duty, cess or fee referred to in section 43B was further vis tax, duty, cess or fee referred to in section 43B was further vis tax, duty, cess or fee referred to in section 43B was further made abundantly clear vide Finance Act 1988, by the insertion made abundantly clear vide Finance Act 1988, by the insertion made abundantly clear vide Finance Act 1988, by the insertion of second proviso to Section 43B. It put the onus on the of second proviso to Section 43B. It put the onus on the of second proviso to Section 43B. It put the onus on the employer to pay his contribution on or before the due dates employer to pay his contribution on or before the due dates employer to pay his contribution on or before the due dates specified under the respective welfare funds, as evident from specified under the respective welfare funds, as evident from specified under the respective welfare funds, as evident from the unambiguous language of second proviso to Section 43B the unambiguous language of second proviso to Section 43B the unambiguous language of second proviso to Section 43B which read as under: which read as under:- *Provided further that no deduction shall, in respect of any sum *Provided further that no deduction shall, in respect of any sum *Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless suc referred to in clause (b), be allowed unless suc referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the actually been paid during the previous year on or before the actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of due date as defined in the Explanation below clause (va) of due date as defined in the Explanation below clause (va) of sub-section (1) of section 36." section (1) of section 36." 4.13. Later on, the second proviso was further amended vide 4.13. Later on, the second proviso was further amended vide 4.13. Later on, the second proviso was further amended vide Finance Act 1989 which did not re Finance Act 1989 which did not relax the rigours of employer's lax the rigours of employer's obligation under section 43B but only provided for the time obligation under section 43B but only provided for the time obligation under section 43B but only provided for the time taken for realisation of payment of PF/ESI by modes other than taken for realisation of payment of PF/ESI by modes other than taken for realisation of payment of PF/ESI by modes other than cash as under: cash as under:- Provided further that no deduction shall, in respect of any sum Provided further that no deduction shall, in respect of any sum Provided further that no deduction shall, in respect of any sum referred to in clause ( referred to in clause (b), be allowed unless such sum has b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by actually been paid in cash or by issue of a cheque or draft or by actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the any other mode on or before the due date as defined in the any other mode on or before the due date as defined in the Explanation below clause (va) of sub Explanation below clause (va) of sub-section (1) of section 36, section (1) of section 36,

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and where such payment has been and where such payment has been made otherwise than in made otherwise than in cash, the sum has been realised within fifteen days from the cash, the sum has been realised within fifteen days from the cash, the sum has been realised within fifteen days from the due date. 4.14. Thus, while tax, duty, cess, fee etc., coming under clause 4.14. Thus, while tax, duty, cess, fee etc., coming under clause 4.14. Thus, while tax, duty, cess, fee etc., coming under clause (a) of section 43B were allowed in the same accounting year if (a) of section 43B were allowed in the same accounting year if (a) of section 43B were allowed in the same accounting year if paid on or before the due date for paid on or before the due date for filing of return us. 139(1) as filing of return us. 139(1) as per First Proviso, Employers' contribution to the employee per First Proviso, Employers' contribution to the employee per First Proviso, Employers' contribution to the employee welfare funds like PF/ESI etc coming under clause (b) were welfare funds like PF/ESI etc coming under clause (b) were welfare funds like PF/ESI etc coming under clause (b) were allowed only if paid within the prescribed due date under allowed only if paid within the prescribed due date under allowed only if paid within the prescribed due date under respective welfare fund schemes as per Second Pr respective welfare fund schemes as per Second Pr respective welfare fund schemes as per Second Proviso of section 43B till 2003. section 43B till 2003. 4.15. In Finance Act. 2003, amendments were made do away 4.15. In Finance Act. 2003, amendments were made do away 4.15. In Finance Act. 2003, amendments were made do away with this differentiation between tax, duty, cess and fee under with this differentiation between tax, duty, cess and fee under with this differentiation between tax, duty, cess and fee under clause (a) of section 43B and clause (a) of section 43B and contributions to various contributions to various Employee's Welfare Funds under clause (b). The d Employee's Welfare Funds under clause (b). The d Employee's Welfare Funds under clause (b). The due date for payment of employer's contribution was also now linked with payment of employer's contribution was also now linked with payment of employer's contribution was also now linked with due date for filing of return of income us. 139(1) of Income Tax due date for filing of return of income us. 139(1) of Income Tax due date for filing of return of income us. 139(1) of Income Tax Act, at par with other payments mentioned in clause (a) of Act, at par with other payments mentioned in clause (a) of Act, at par with other payments mentioned in clause (a) of section 43B. Thus, in Finance Act, 2003, two changes were section 43B. Thus, in Finance Act, 2003, two changes were section 43B. Thus, in Finance Act, 2003, two changes were made in section 43B viz. deletion of the second proviso to de in section 43B viz. deletion of the second proviso to de in section 43B viz. deletion of the second proviso to section 43B and further amendment in the first proviso with section 43B and further amendment in the first proviso with section 43B and further amendment in the first proviso with effect from 1st April 2004 as under: effect from 1st April 2004 as under: *Provided that nothing contained in this section shall apply in *Provided that nothing contained in this section shall apply in *Provided that nothing contained in this section shall apply in relation to any sum which is actually relation to any sum which is actually paid by the assessee on paid by the assessee on or before the due date applicable in his case for furnishing the or before the due date applicable in his case for furnishing the or before the due date applicable in his case for furnishing the retum of income under sub retum of income under sub- section (1) of section 139 in respect section (1) of section 139 in respect of the previous year in which the liability to pay such sum was of the previous year in which the liability to pay such sum was of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence incurred as aforesaid and the evidence of such payment is of such payment is furnished by the assessee along with such return. furnished by the assessee along with such return. furnished by the assessee along with such return. 4.16. The question as to whether this amendment brought 4.16. The question as to whether this amendment brought 4.16. The question as to whether this amendment brought about by Finance Act, 2003 to the first and second proviso of about by Finance Act, 2003 to the first and second proviso of about by Finance Act, 2003 to the first and second proviso of section 43B is prospective or retrospective came up for section 43B is prospective or retrospective came up for section 43B is prospective or retrospective came up for consideration before the Hon'ble Supreme Court in the case of n before the Hon'ble Supreme Court in the case of n before the Hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [2009] 319 IT 306/185 Taxman Alom Extrusions Ltd. [2009] 319 IT 306/185 Taxman Alom Extrusions Ltd. [2009] 319 IT 306/185 Taxman 416. Having considered the legislative intent and purpose, the 416. Having considered the legislative intent and purpose, the 416. Having considered the legislative intent and purpose, the Hon'ble Supreme Court held that amendment as enacted by Hon'ble Supreme Court held that amendment as enacted by Hon'ble Supreme Court held that amendment as enacted by Finance act 2003 led to equati Finance act 2003 led to equating tax, duty, cess, and fee with ng tax, duty, cess, and fee with contributions to welfare funds and that that though the contributions to welfare funds and that that though the contributions to welfare funds and that that though the

M/s G.L. Construction Pvt. Ltd. M/s G.L. Construction Pvt. Ltd. 11 ITA No. 2846/M/2022 AY 2019-20

amendments were with effect from 1st April 2004, they were amendments were with effect from 1st April 2004, they were amendments were with effect from 1st April 2004, they were retrospective in nature and would operate from 1 retrospective in nature and would operate from 1st st April 1988.” 6. Before us, the Ld. Counsel of the assesse Before us, the Ld. Counsel of the assessee e in support of additional ground submitted that the CPC is not authorized to carry submitted that the CPC is not authorized to carry submitted that the CPC is not authorized to carry out disallowance of ESI/PF invoking section 143(1)(a)(iv) of the Act. out disallowance of ESI/PF invoking section 143(1)(a)(iv) of the Act. out disallowance of ESI/PF invoking section 143(1)(a)(iv) of the Act. In support of the contention he relied on the decision of the In support of the contention he relied on the decision of the In support of the contention he relied on the decision of the Mumbai ‘SMC’ Bench in the case of PR Packaging Services v. CIT in Mumbai ‘SMC’ Bench in the case of PR Packaging Services v. CIT in Mumbai ‘SMC’ Bench in the case of PR Packaging Services v. CIT in ITA No. 2376/Mum/2022 for assessment year 2019 2376/Mum/2022 for assessment year 2019- -2020.

6.1 In support of ground, he submitted that the amount of In support of ground, he submitted that the amount of In support of ground, he submitted that the amount of disallowance of Rs.12,71,218/ disallowance of Rs.12,71,218/- consist of ESI/PF contribution of consist of ESI/PF contribution of Rs.9,47,090/- and professional tax deducted out of salary of and professional tax deducted out of salary of and professional tax deducted out of salary of Rs.3,24,125/-. The Ld. Cou . The Ld. Counsel submitted that professional tax nsel submitted that professional tax paid is not hit by the section 36(1)(va) of the Act and therefore, paid is not hit by the section 36(1)(va) of the Act and therefore, paid is not hit by the section 36(1)(va) of the Act and therefore, same should be allowed on the basis of payment made in terms of same should be allowed on the basis of payment made in terms of same should be allowed on the basis of payment made in terms of section 43B of the Act. section 43B of the Act.

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143(1)(a)(iv) adjustment of adjustment of disallowance of expenditure o nce of expenditure or increase in income indicated in the audit report income indicated in the audit report can be can be made while processing the return of income processing the return of income if same is not taken into account if same is not taken into account while computing the total income for the purpose of return of while computing the total income for the purpose of return of while computing the total income for the purpose of return of income. The relevant provision of section 143(1) of the Act . The relevant provision of section 143(1) of the Act is . The relevant provision of section 143(1) of the Act reproduced as under: reproduced as under:

“Section 143(1) Where a returns has been made under section Section 143(1) Where a returns has been made under section Section 143(1) Where a returns has been made under section 139, or in response to a notice under sub 139, or in response to a notice under sub-section (1) of section section (1) of section 142 such return shall be processed in the following manner, 142 such return shall be processed in the following manner, 142 such return shall be processed in the following manner, namely :- (a) The total income or loss shall be co The total income or loss shall be computed after making the mputed after making the following adjustments, namely: following adjustments, namely:- (i) Any arithmetical error in the return Any arithmetical error in the return An incorrect claim, if such incorrect claim is apparent An incorrect claim, if such incorrect claim is apparent An incorrect claim, if such incorrect claim is apparent from any information in the return; from any information in the return; (ii) Disallowance of loss claimed, if return of the previous Disallowance of loss claimed, if return of the previous Disallowance of loss claimed, if return of the previous year for whic year for which set off of loss is claimed was furnished h set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of beyond the due date specified under sub beyond the due date specified under sub section 139; section 139; (iv) disallowance of expenditure [or increase in income] (iv) disallowance of expenditure [or increase in income] (iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account indicated in the audit report but not taken into account indicated in the audit report but not taken into account in computing the total income in computing the total income in the return; (v) disallowance of deduction claimed under *[section 10AA or (v) disallowance of deduction claimed under *[section 10AA or (v) disallowance of deduction claimed under *[section 10AA or under any of the provisions of Chapter VI under any of the provisions of Chapter VI-A under the heading A under the heading "C. Deductions in respect of certain incomes", if ] the return is "C. Deductions in respect of certain incomes", if ] the return is "C. Deductions in respect of certain incomes", if ] the return is furnished beyond the due date specified under sub furnished beyond the due date specified under sub furnished beyond the due date specified under sub-section (1) of section 139; or of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or (vi) addition of income appearing in Form 26AS or Form 16A or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total 16 which has not been included in computing the total 16 which has not been included in computing the total income in the return: income in the return:

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Provided that no such adjustments shall be made unless an Provided that no such adjustments shall be made unless an Provided that no such adjustments shall be made unless an intimation is given to th intimation is given to the assessee of such adjustments either e assessee of such adjustments either in writing or in electronic mode: in writing or in electronic mode:” 8.1 The Ld. Counsel submitted that delayed payment of ESI/PF The Ld. Counsel submitted that delayed payment of ESI/PF The Ld. Counsel submitted that delayed payment of ESI/PF cannot be adjusted invoking section 143(1)(a)(iv) of the Act for the be adjusted invoking section 143(1)(a)(iv) of the Act for the be adjusted invoking section 143(1)(a)(iv) of the Act for the reason that payment of ESI/PF is not a claim of expenditure but it reason that payment of ESI/PF is not a claim of expenditure but it reason that payment of ESI/PF is not a claim of expenditure but it is a claim of deduction. is a claim of deduction. On perusal of the above provisions, provisions, it is clear that any incorrect claim made clear that any incorrect claim made in the return of income the return of income, can be disallowed invoking section 143(1)(a)(i invoking section 143(1)(a)(i) of the Act. We further find ) of the Act. We further find that Tribunal in the case of Nissan Enterprises Ltd. v. DCIT CPC Enterprises Ltd. v. DCIT CPC that Tribunal in the case of in ITA No. 3270/Mum/2022 in order dated 17.02.2023 after in ITA No. 3270/Mum/2022 in order dated 17.02.2023 in ITA No. 3270/Mum/2022 in order dated 17.02.2023 considering the decision of the Tribunal in the case of PR Packaging considering the decision of the Tribunal in the case of considering the decision of the Tribunal in the case of Services (supra) held that pursuant to the decision of the Hon’ble Services (supra) held that pursuant to the decision of the Hon’ble Services (supra) held that pursuant to the decision of the Hon’ble Supreme Court in the case of Checkmet Services Pvt. Ltd. (supra), Supreme Court in the case of Checkmet Services Pvt. Ltd. (supra) Supreme Court in the case of Checkmet Services Pvt. Ltd. (supra) the claim of deduction towards employees contribution to PF and the claim of deduction towards employees contribution to PF and the claim of deduction towards employees contribution to PF and ESI made by the taxpayer becomes an incorrect ESI made by the taxpayer becomes an incorrect claim warranting claim warranting prima facie adjustment u/s 143(1) of the Act. The relevant finding prima facie adjustment u/s 143(1) of the Act. The relevant finding prima facie adjustment u/s 143(1) of the Act. The relevant finding of the Tribunal (supra) of the Tribunal (supra) is reproduced as under:

"3.1. The Id. AR vehemently relied on the decision of the Co "3.1. The Id. AR vehemently relied on the decision of the Co "3.1. The Id. AR vehemently relied on the decision of the Co- ordinate Bench of this Tribunal in the case of P.R. Packaging ordinate Bench of this Tribunal in the case of P.R. Packaging ordinate Bench of this Tribunal in the case of P.R. Packaging Services in IT No.2376/Mum/2022 dated 07/12/22 (authored Services in IT No.2376/Mum/2022 dated 07/12/22 (authored Services in IT No.2376/Mum/2022 dated 07/12/22 (authored by the undersigned) wherein this issue has been decided in by the undersigned) wherein this issue has been decided in by the undersigned) wherein this issue has been decided in favour of the ass favour of the assessee. We find that the said decision was essee. We find that the said decision was rendered by applying the provisions of Section 143(1)(iv) of the rendered by applying the provisions of Section 143(1)(iv) of the rendered by applying the provisions of Section 143(1)(iv) of the Act. Pursuant to the aforesaid decision of the Hon'ble Supreme Act. Pursuant to the aforesaid decision of the Hon'ble Supreme Act. Pursuant to the aforesaid decision of the Hon'ble Supreme Court, the claim of deduction towards employee's contribution Court, the claim of deduction towards employee's contribution Court, the claim of deduction towards employee's contribution to PF & ESI made by the to PF & ESI made by the assessee becomes .an incorrect claim assessee becomes .an incorrect claim warranting primafacie adjustment us.143(1) of the Act. Hence, warranting primafacie adjustment us.143(1) of the Act. Hence, warranting primafacie adjustment us.143(1) of the Act. Hence,

M/s G.L. Construction Pvt. Ltd. M/s G.L. Construction Pvt. Ltd. 14 ITA No. 2846/M/2022 AY 2019-20

the decision relied by the Id. AR would not advance the case of the decision relied by the Id. AR would not advance the case of the decision relied by the Id. AR would not advance the case of the assessee. the assessee. 3.2. In view of the aforesaid observations and respectfully 3.2. In view of the aforesaid observations and respectfully 3.2. In view of the aforesaid observations and respectfully following the decis following the decision of the Hon'ble Supreme Court referred to ion of the Hon'ble Supreme Court referred to supra, the grounds raised by the assessee are hereby supra, the grounds raised by the assessee are hereby supra, the grounds raised by the assessee are hereby dismissed" 8.2 Therefore, respectfully following the decision of the Hon’ble Therefore, respectfully following the decision of the Hon’ble Therefore, respectfully following the decision of the Hon’ble Supreme Court in the Checkmet Services Pvt. Ltd. (supra) and Supreme Court in the Checkmet Services Pvt. Ltd. (supra) and Supreme Court in the Checkmet Services Pvt. Ltd. (supra) and finding of the Tribunal in the case o nal in the case of Nissan Enterprises (supra) we f Nissan Enterprises (supra) we are of the opinion that adjustment for employees contribution to PF are of the opinion that adjustment for employees contribution to PF are of the opinion that adjustment for employees contribution to PF and ESI of for late deposit after the due dates can be made by the and ESI of for late deposit after the due dates can be made by the and ESI of for late deposit after the due dates can be made by the CPC while processing the return of income. The additional ground CPC while processing the return of income. The additional ground CPC while processing the return of income. The additional ground raised by the assessee is accordingly dismissed. by the assessee is accordingly dismissed.

8.3 As far as the ground of assessee for disallowance of As far as the ground of assessee for disallowance of As far as the ground of assessee for disallowance of Rs.12,71,218/- which which comprised comprised of of Rs.3,24,125/ Rs.3,24,125/- being professional tax deducted from salary. In our opinion deduction of professional tax deducted from salary. In our opinion deduction of professional tax deducted from salary. In our opinion deduction of professional tax is allowed to the professional tax is allowed to the assessee only on payment basis in assessee only on payment basis in terms of section 43B of the Act and therefore, we feel it appropriate terms of section 43B of the Act and therefore, we feel it appropriate terms of section 43B of the Act and therefore, we feel it appropriate to restore this issue back to the file of the Ld. Assessing Officer for to restore this issue back to the file of the Ld. Assessing Officer for to restore this issue back to the file of the Ld. Assessing Officer for and if this claim of the assessee is found to be correct, verification and if this claim of the assessee is found to be correct and if this claim of the assessee is found to be correct made to be allowed as then the professional tax of Rs.3,24,125/ then the professional tax of Rs.3,24,125/- made to be allowed as per the provisions of section 43B of the Act. The ground of appeal of per the provisions of section 43B of the Act. The ground of appeal of per the provisions of section 43B of the Act. The ground of appeal of the assessee is accordingly partly allowed. the assessee is accordingly partly allowed.

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Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 23/02/2023. 02/2023. Sd/- Sd/ Sd/- (PAVAN KUMAR GADALE PAVAN KUMAR GADALE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 23/02/2023 Rahul Sharma, Sr. P.S.

Copy of the Order forwarded to forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai